Metrogas Foresees US$38 Million Annual Profit

Chilean natural gas distributor Metrogas will post US$38mn profits in 2003, when it expects gas sales to total 737 million cubic meters and sales revenue to be US$173mn, Metrogas CFO Eduardo Calvo told BNamericas.

The company expects the price of oil and its derivatives to fall in 2004, pressuring the price of the natural gas downwards. As a result, sales revenues will fall to US$172mn and profits will come in at US$32mn, despite physical sales increasing to 799mcm, Calvo said.

Metrogas has 293,000 clients and expects this to increase to 300,000 by year-end, and 324,000 by the end of 2004, he said. Most of the company's new clients are from new real estate developments, where installation costs are lower because the main expense is digging trenches rather than digging up and repaving roads and sidewalks to connect existing homes.

Metrogas's main market is capital city Santiago, where at present it has 63% penetration of the area in which it has installed its network. The company aims to increase this to 100% over the next 10 years or so, Calvo said. Extending the network to new areas within the concession area is considered on a case-by-case basis, and if profitability is predicted at over 15%, the company will make the connection, he added.

Expanding beyond Santiago, Metrogas wants to connect industrial clients to the south. It has built a pipeline to Region VI capital Rancagua, and the line currently carries gas as far as San Francisco de Mostazal, serving clients including International Paper and Nestle.

Metrogas will have completed studies of potential industrial clients in the south of Region VI by the end of this year, Calvo said, refusing to comment further because of the strong competition from Valparaiso-based GasValpo in that area. Rancagua's residential market does not interest Metrogas much because of the low demand it anticipates and the high cost of converting appliances to natural gas from LPG, Calvo said. Costs associated with building the Rancagua pipeline will increase investment to US$41mn in 2004 from US$32mn in 2003, Calvo said, adding that the company's normal investment rhythm is US$30mn-35mn a year.

Metrogas paid its first ever dividends in June and expects to do likewise in December. Total debts are US$279mn, with US$183mn in three bond issues and the rest with a variety of Chilean banks. Taking advantage of the long-term rates on the market at present, the company will launch a bond issue November 14 to refinance debt, switching from bank debt at variable interest rates to the set rate that bonds offer. The issue, in respective series of 6 and 21 years, will be for 4.5mn UF (Chile's index-linked financial unit, which at today's rates makes the issue worth US$120mn). All Metrogas's bank debt is in UF, with the exception of a US$46.6mn bullet loan from bank BBVA that matures in December 2006. The next maturity is a 760,000UF loan in April 2004.

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